Pension Schemes Bill (Seventh sitting)

John Milne Excerpts

Committee stage
Thursday 11th September 2025 Public Bill Committees

[Torsten Bell]

Chapter 3 sets out the criteria for approving superfund transfers. The clause protects the integrity of the superfund regime that we are aiming to put in place through the Bill by making it clear that the penalty for committing an unauthorised superfund transfer may be a fine, imprisonment for up to two years, or both. I commend the clause to the Committee.

Question put and agreed to.

Clause 57 accordingly ordered to stand part of the Bill.

Clause 58

Approval of superfund transfers

[John Milne (Horsham) (LD)]

I beg to move amendment 268, in clause 58, page 67, line 34, leave out subsection (a) and insert—

“(a) that, as at the date of the application, the financial position of the ceding scheme is—

(i) not strong enough to enable the trustees to arrange an insurer buy-out, or

(ii) not affordable for the next 36 months following an assessment, certified by the scheme actuary, of all funding options to become strong enough;”.

This amendment expands the onboarding condition to give an alternative to a single day snapshot of a scheme’s funding position.

The Bill tests a scheme’s funding position on a single snapshot day. We feel that is too rigid and could unfairly exclude schemes. A scheme might just miss the mark on that day, even though funding prospects over the next three years are realistic and affordable. The amendment would allow actuaries to certify affordability over a 36-month horizon, providing a fairer and more flexible test. It would protect members by ensuring viable schemes are not shut out, while still requiring strong actuarial oversight. That is especially important in an environment where economic conditions and markets can move significantly and take scheme funding positions with them.

Schemes have not always enjoyed the present funding levels, and today’s surplus is tomorrow’s deficit. We should have regard to that fact and approach the legislation in a manner that reflects it. In the assessment over a longer time period, the trustees would also be able to consider and respond to the situation in relation to dividends, changing investment strategies and expected scheme contributions, among other key factors. In summary, the purpose of the amendment is not to block the superfund option for schemes, but rather to ensure that the legislative framework is set squarely on the basis of protecting DB scheme member benefits and the security and soundness of the pensions system.

[Kirsty Blackman (Aberdeen North) (SNP)]

We have discussed other parts of the regime—for example, new entrants and their ability to scale up, and the longer-term prospects for that—which were perhaps a bit more flexible than this part. Although I am not entirely convinced that the exact wording of the amendment provides the best way to go about it, if the Minister gives some reassurance and a commitment to consider the possibility of not just taking a snapshot day, and to look at the potential ability to scale up or grow, I would be more comfortable with the legislation than I am currently.

[Torsten Bell]

I thank the hon. Members for Torbay and for Horsham for the amendment. It is sensible to discuss one of the key questions in the design of superfunds policy. My main reassurance is that this exact option, or options in this space, were part of the extensive consultation on superfunds. That is important to understand. They were in the consultation, and a wide range of views were expressed in the responses, many of them pointing to the clear practical difficulties of providing the legislative test to assess whether a scheme could afford an insurance buy-out in future, as opposed to its exact position at the time of the assessment.

For reasons I will come on to, that does not mean that it is not important to look ahead to whether a scheme is likely to be able to buy out in the future, but we have taken the view, following the consultation, that that should not be the test on the face of the Bill. That is because, when it comes to projections looking ahead, both the cost of an insurance buy-out and the scheme funding levels can fluctuate significantly. Forecasts ask for more judgment to be exercised compared with an assessment of what the buy-out market is offering at the time it is carried out. It is about the current funding levels. Clause 58 already states that schemes can transfer a superfund only when they are currently unable to secure members’ benefits with an insurer.

I will offer two elements of reassurance to the hon. Member for Horsham. First, we need to be clear about the role of the legislation, which is as I just set out, and the role of the trustees, who are the ones who would approve a transfer to a superfund. Trustees will absolutely be looking ahead and thinking about the kinds of issue that the hon. Member highlighted. Do they wish to see a superfund transfer or a buy-out transfer in future? Is it plausible that they would get one? They will be relying on the guidance of the TPR and the clear intent in the legislation, which is that superfunds will provide an additional option, not replace the core approach of most defined-benefit schemes’ goal, which is an insurance buy-out. I therefore do not support putting the proposed test on the face of the Bill. Also, as the hon. Member for Aberdeen North pointed out, there are issues with the drafting of the amendment, which requires trustees in legislation to do what they will, in practice, be doing anyway.

The second point of reassurance I can offer is that the Bill sets out a power to substitute another condition to replace this condition, if needed. We will consult the industry to assess what, if any, further requirements might be added to satisfy members before the regime comes into effect. I hope that on that basis, the hon. Member will be happy to withdraw his amendment.

[John Milne]

I thank the Minister for his reassurance, but urge him to keep this in mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Kirsty Blackman]

I beg to move amendment 277, in clause 58, page 67, line 34, leave out from “application” to end of line 36 and insert

“the Trustees agree, after due consideration, that it is the best option for their fund’s members;”.

This amendment would prevent a fund from having to carry out an insurance buy-out option.

The amendment asks a reasonable question about the duties of the trustees, and the possibility that they will be overwritten by the legislation and taken away from trustees. I would appreciate some reassurance from the Minister on whether the trustees will still have a duty to act in the best interests of scheme members once the legislation goes through, and whether the amendment tabled by the hon. Member for Tamworth would make things better for trustees, with them better able to act in the best interests of pension scheme members.

--- Later in debate ---

[Torsten Bell]

These new clauses are intended to help schemes affected by the implications of the Virgin Media v. NTL pension trustees court judgments, which found that certain benefit changes could be void if a scheme cannot produce actuarial confirmation that they met the requirements at the time. That has created significant uncertainty about affected schemes’ liabilities and funding requirements.

The new clauses apply to private and public sector defined-benefit pension schemes that were contracted out between 1997 and 2016 under the reference scheme test, which imposed certain legal requirements upon them. The new clauses let schemes ask their actuary to confirm retrospectively that a past change to benefits would not have stopped the scheme from meeting these legal requirements at the time, rather than requiring the scheme to produce actuarial confirmation of the same facts at the time that the change was actually made. They will help members and schemes get the certainty they need.

I want to assure the Committee that these new clauses do not change the underpinning standards that were required. They are not a retrospective pardon for benefit changes that did not meet the legal standards within existing schemes. If a scheme did not obtain written confirmation at the time, and cannot obtain retrospective confirmation, the benefit changes can be held to be void, as provided for under current law.

New clause 23 defines the language and parameters of the other clauses of this section of the Bill. New clause 24 gives the trustees or managers of a scheme the power to ask the scheme actuary to confirm that a previous change to benefits would not have stopped the scheme from meeting legal requirements at that time.

New clause 25 introduces an approach for schemes whose liabilities have already been transferred to the Pension Protection Fund or to the financial assistance scheme. Any benefit changes will be deemed to have been made with actuarial confirmation in those cases. This different approach is needed because individual schemes no longer exist when they have entered the PPF, and there is no longer a scheme actuary. The PPF and FAS would also not have the information required on individual schemes to enable an actuary to provide retrospective confirmation. This ensures that the level of compensation or assistance will continue to be paid to members at current levels.

New clause 25 also introduces an explicit provision for wound-up schemes that deems that benefit changes made to the scheme were compliant with the requirement to have confirmation from an actuary. This will make sure that the benefits provided to members, for example through an annuity, will not be incorrect as a result of any historical failure to obtain a written actuarial confirmation.

The legal recourse for members would otherwise be against the former scheme trustees, because they cannot have recourse against the provider of the annuity. However, we think it would be unreasonable for these trustees to be potentially personally liable in a situation where they could not obtain a retrospective actuarial confirmation because the scheme and its records no longer exist.

New clause 26 provides a regulation-making power to provide for specified alterations to be excluded from the scope of the retrospective confirmation route and to make consequential amendments to the legislation. The power is not intended for immediate use but is included to future-proof the legislation. The clause also contains a separate power to amend existing primary legislation. I want to assure the Committee that the power is narrow, enables consequential amendments to be made, and is subject to the affirmative procedure.

New clauses 27 to 30 make mirroring provisions for Northern Ireland, at the request of the Northern Ireland Executive. I commend the new clauses to the Committee.

Question put and agreed to.

New clause 23 accordingly read a Second time, and added to the Bill.

New Clause 24

Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes

“(1) This section applies to any potentially remediable alteration purportedly made to a scheme other than one to which section (Validity of certain alterations to GB salary-related contracted-out pension schemes: wound up schemes and other special cases) applies.

(2) If the conditions mentioned in subsection (3) are met in relation to it, the alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made, and so as having always been a valid alteration so far as those requirements are concerned.

(3) The conditions are—

(a) that the trustees or managers of the scheme have made a request in writing to the scheme actuary for the actuary to consider whether or not, on the assumption that it was validly made, the alteration would have prevented the scheme from continuing to satisfy the statutory standard, and

(b) that the scheme actuary has confirmed to the trustees or managers in writing that in the actuary’s opinion it is reasonable to conclude that, on the assumption that it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the statutory standard.

In this subsection ‘the statutory standard’ means the statutory standard for a contracted-out scheme under section 12A of the Pension Schemes Act 1993 as it had effect at the time the alteration was purportedly made.

(4) A scheme actuary who has received a request under subsection (3)(a) in relation to a potentially remediable alteration to a scheme—

(a) may take any professional approach (including making assumptions or relying on presumptions) that is open to the actuary in all the circumstances of the case;

(b) may act on the basis of the information available to the actuary, as long as the actuary considers it sufficient for the purpose of forming an opinion on the subject-matter of the request.

(5) A condition mentioned in subsection (3) may be met by action taken before (as well as action taken after) this section comes into force.

(6) Subsection (7) applies to a scheme if —

(a) there is an assessment period in relation to the scheme within the meaning of Part 2 of the Pensions Act 2004, or

(b) the scheme is operating as a closed scheme under section 153 of that Act.

(7) The powers of the Board of the Pension Protection Fund under section 134 and section 155 of the Pensions Act 2004 to give directions includes power to give a direction to the trustees or managers of the scheme requiring them—

(a) to make a request under subsection (3)(a) above in relation to a potentially remediable alteration to the scheme, and

(b) to take any necessary action to enable or facilitate the making of a decision by the scheme actuary as to whether to give the confirmation described in subsection (3)(b) above in relation to that alteration.”—(Torsten Bell.)

This new clause enables the trustees or managers of a scheme to ask the scheme actuary to consider the position of an alteration when it was (purportedly) made. If the actuary confirms that it is reasonable to conclude that at that time the alteration would not have prevented the scheme from continuing to meet the statutory standard for contracted-out schemes, then the alteration is retrospectively deemed by subsection (2) to have been validly made, so far as the requirements of regulation 42(2)(a) and (b) are concerned.

Brought up, read the First and Second time, and added to the Bill.

New Clause 25

Validity of certain alterations to GB salary-related contracted-out pension schemes: wound up schemes and other special cases

“(1) This section applies to any potentially remediable alteration purportedly made to the rules of—

(a) a scheme which has been wound up before this section comes into force,

(b) a scheme for which the Board of the Pension Protection Fund has, before this section comes into force, assumed responsibility in accordance with Chapter 3 of Part 2 of the Pensions Act 2004 (see section 161 of that Act), or

(c) a scheme which is a qualifying pension scheme for the purposes of regulation 9 of the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) and in respect of which payments are required to be made under section 286 of the Pensions Act 2004.

(2) The alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made and so as having always been a valid alteration so far as those requirements are concerned.”—(Torsten Bell.)

This new clause deals with cases where it would not now be practicable for the confirmation described in NC24(3)(b) to be obtained in relation to a potentially remediable alteration. In such cases the clause retrospectively deems the alteration to have been validly made so far as the requirements of regulation 42(2)(a) and (b) are concerned.

Brought up, read the First and Second time, and added to the Bill.

New Clause 26

Power to amend provisions of Chapter 1 etc: Great Britain

“(1) The Secretary of State may by regulations amend any of sections (Sections (Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1): interpretation and scope), (Validity of certain alterations to GB salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to GB salary-related contracted out pension schemes: wound up schemes and other special cases) for the purpose of providing for purported alterations of any specified description to be outside the scope of remediation under either or both of sections (Validity of certain alterations to salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to salary-related contracted-out pension schemes: wound up schemes and other special cases).

(2) In subsection (1) ‘specified’ means specified in the regulations; and a specified description of purported alterations may be framed by reference to features of the alterations or of the schemes purportedly altered by them (or a combination of both).

(3) Regulations under subsection (1) are subject to the negative procedure.

(4) The Secretary of State may by regulations make incidental, supplementary, consequential or transitional provision in connection with any provision of this Chapter (other than this section and section (Powers to amend Chapter 1 etc: Northern Ireland)).

(5) Regulations under subsection (4) may amend any Act passed before or in the same Session as this Act.

(6) Regulations under subsection (4) are subject to the affirmative procedure if they contain provision made under subsection (5); otherwise they are subject to the negative procedure.”—(Torsten Bell.)

This new clause enables regulations made for England and Wales or Scotland (a) to specify further categories of alterations in respect of which the clauses validating otherwise void alterations do not apply and (b) to make incidental, supplementary, transitional or consequential provision relating to any provision of the new Chapter addressing the validity of alterations to pension schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 27

Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Power to amend Chapter 1): interpretation and scope

“(1) The provisions of this section have effect for the purposes of this section and sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc: Northern Ireland).

(2) ‘NI scheme’ means an occupational pension scheme that was a salary-related contracted-out scheme in Northern Ireland; and for this purpose an occupational pension scheme was a salary-related contracted-out scheme in Northern Ireland at any time if the scheme was contracted-out at that time by virtue of satisfying section 5(2) of the Pension Schemes (Northern Ireland) Act 1993 (as it then had effect).

(3) ‘Scheme actuary’, in relation to an NI scheme, means—

(a) the person for the time being appointed as actuary for the scheme under Article 47 of the Pensions (Northern Ireland) Order 1995 (SI 1995/3213 (N.I. 22)) (professional advisers), or

(b) if there is no person so appointed, a Fellow of the Institute and Faculty of Actuaries appointed by the trustees or managers of the scheme to carry out the functions of the scheme actuary under section (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes).

(4) ‘Section 33(1)’ refers to section 33(1) of the Pension Schemes (Northern Ireland) Act 1993 (prohibition of alterations to rules of contracted-out schemes in certain circumstances).

(5) ‘Regulation 42’ refers to regulation 42 of the Occupational Pension Schemes (Contracting-out) Regulations (Northern Ireland) 1996 (SR 1996 No. 493).

(6) An alteration purporting to have been made to the rules of an NI scheme is a ‘potentially remediable alteration’ if—

(a) by virtue of section 33(1) and paragraphs (1) and (2) of regulation 42 (as they had effect at the time), the alteration could not be made unless the requirements of paragraph (2)(a), (b) and (c) of regulation 42 (as they then had effect) had been met,

(b) it was treated by the trustees or managers of the scheme, after it was purportedly made, as a valid alteration,

(c) no positive action has been taken by the trustees or managers of the scheme on the basis that they consider the alteration to be void (and so of no legal effect) by reason of non-compliance with the requirements of paragraph (2)(a) and (b) of regulation 42, and

(d) it is not excluded from the scope of remediation under section (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) (see subsection (7)).

(7) In subsection (6)(c) ‘positive action’, in relation to a purported alteration, means—

(a) notifying any members of the scheme in writing to the effect that the trustees or managers consider the alteration to be void (by reason of non-compliance with the requirements of paragraph (2)(a) and (b) of regulation 42) and that the scheme will be administered on the basis that it has no legal effect, or

(b) taking any other step in relation to the administration of the scheme, in consequence of the trustees or managers considering the alteration to be void, which has (or will have) the effect of altering payments to or in respect of members of the scheme.

(8) An alteration purporting to have been made to the rules of an NI scheme is excluded from the scope of remediation under sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) if any question relating to the validity of the alteration, so far as relating to the requirements of paragraph (2)(a) and (b) of regulation 42—

(a) has been determined by a court before this section comes into force in legal proceedings to which the trustees or managers were a party,

(b) was in issue on or before 5 June 2025 in legal proceedings to which the trustees or managers were a party, but has been settled by agreement between the parties at any time before this section comes into force, or

(c) was in issue on or before 5 June 2025 in legal proceedings to which the trustees or managers were a party, and remains in issue when this section comes into force.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC23. Northern Ireland generally has its own pensions legislation which is separate from the legislation applying to England and Wales and Scotland.

Brought up, read the First and Second time, and added to the Bill.

New Clause 28

Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes

“(1) This section applies to any potentially remediable alteration purportedly made to an NI scheme other than one to which section (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) applies.

(2) If the conditions mentioned in subsection (3) are met in relation to it, the alteration is to be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made, and so as having always been a valid alteration so far as those requirements are concerned.

(3) The conditions are—

(a) that the trustees or managers of the scheme have made a request in writing to the scheme actuary for the actuary to consider whether or not, on the assumption that it was validly made, the alteration would have prevented the scheme from continuing to satisfy the statutory standard, and

(b) that the scheme actuary has confirmed to the trustees or managers in writing that in the actuary’s opinion it is reasonable to conclude that, on the assumption that it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the statutory standard.

In this subsection ‘the statutory standard’ means the statutory standard for a contracted-out scheme under section 8A of the Pension Schemes (Northern Ireland) Act 1993 as it had effect at the time the alteration was purportedly made.

(4) A scheme actuary who has received a request under subsection (3)(a) in relation to a potentially remediable alteration to a scheme—

(a) may take any professional approach (including making assumptions or relying on presumptions) that is open to the actuary in all the circumstances of the case:

(b) may act on the basis of the information available to the actuary, as long as the actuary considers it sufficient for the purpose of forming an opinion on the subject-matter of the request.

(5) A condition mentioned in subsection (3) may be met by action taken before (as well as action taken after) this section comes into force.

(6) Subsection (7) applies to a scheme if —

(a) there is an assessment period in relation to the scheme within the meaning of Chapter 3 of Part 3 of the Pensions (Northern Ireland) Order 2005 (SI 2005/255 (N.I. 1)) , or

(b) the scheme is operating as a closed scheme under Article 137 of that Order.

(7) The powers of the Board of the Pension Protection Fund under Article 118 and 139 of the Pensions (Northern Ireland) Order 2005 to give directions include power to give a direction to the trustees or managers of the scheme requiring them—

(a) to make a request under subsection (3)(a) in relation to a potentially remediable alteration to the scheme, and

(b) to take any necessary action to enable or facilitate the making of a decision by the actuary as to whether to give the confirmation described in subsection (3)(b) in relation to that alteration.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC24.

Brought up, read the First and Second time, and added to the Bill.

New Clause 29

Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases

“(1) This section applies to any potentially remediable alteration purportedly made to the rules of—

(a) a scheme which has been wound up before this section comes into force,

(b) a scheme for which the Board of the Pension Protection Fund has, before this section comes into force, assumed responsibility in accordance with Chapter 3 of Part 3 of the Pensions (Northern Ireland) Order 2005 (see Article 145 of that Order), or

(c) a scheme which is a qualifying pension scheme for the purposes of regulation 9 of the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) and in respect of which payments are required to be made under section 286 of the Pensions Act 2004.

(2) The alteration is be treated for all purposes as having met the requirements of paragraph (2)(a) and (b) of regulation 42 before it was purportedly made and so as having always been a valid alteration so far as those requirements are concerned.”—(Torsten Bell.)

This new clause makes provision for Northern Ireland corresponding to NC25.

Brought up, read the First and Second time, and added to the Bill.

New Clause 30

Powers to amend Chapter 1 etc: Northern Ireland

“(1) A Northern Ireland Department may by regulations amend any of sections (Sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) to (Powers to amend Chapter 1 etc: Northern Ireland): interpretation and scope), (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases) for the purpose of providing for purported alterations of any specified description not to be within the scope of remediation under either or both of sections (Validity of certain alterations to NI salary-related contracted-out pension schemes: subsisting schemes) and (Validity of certain alterations to NI salary-related contracted-out pension schemes: wound up schemes and other special cases).

(2) In subsection (1) ‘specified’ means specified in the regulations; and a specified description of purported alterations may be framed by reference to features of the alterations or of the schemes purportedly altered by them (or a combination of both).

(3) A Northern Ireland Department may by regulations make incidental, supplementary, consequential or transitional provision in connection with any provision of this Chapter (other than section (Powers to amend Chapter 1 etc: Great Britain) and this section).

(4) Regulations made under this section are subject to negative resolution within the meaning given by section 41(6) of the Interpretation Act (Northern Ireland) 1954.

(5) The power of a Northern Ireland Department to make regulations under this section is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).”—(Torsten Bell.)

This new clause enables regulations made for Northern Ireland (a) to specify further categories of alterations in respect of which the clauses validating otherwise void alterations do not apply and (b) to make incidental, supplementary, transitional or consequential provision relating to any provision of the new Chapter addressing the validity of alterations to pension schemes.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Universal Pension Advice Entitlement

“(1) The Secretary of State must by regulations establish a system to ensure that every individual has a right to receive free, impartial pension advice at prescribed times.

(2) Regulations under subsection (1) must provide for individuals to be offered advice—

(a) at or around the age of 40; and

(b) at a prescribed age, not more than six years before the individual's expected retirement age.

(3) The regulations must make provision about—

(a) the content and scope of the free, impartial pension advice, which may include, but is not limited to, guidance on—

(i) pension types (including both defined contribution and defined benefit schemes),

(ii) investment strategies,

(iii) charges,

(iv) consolidation of pension pots, and

(v) retirement income options;

(b) the qualifications, independence, and impartiality requirements for any person or body providing advice;

(c) the means by which individuals are notified of their entitlement to receive the advice and how they may access it;

(d) the roles and responsibilities of pension scheme trustees, managers, and providers in facilitating access to advice;

(e) the sharing member information with prescribed persons or bodies subject to appropriate data protection safeguards.

(4) Regulations under this section may—

(a) make different provision for different descriptions of pension schemes or different descriptions of individuals;

(b) confer functions in connection with the provision or oversight of the advice on—

(i) the Pensions Regulator,

(ii) the Financial Conduct Authority,

(iii) the Money and Pensions Service, or

(iv) other prescribed bodies;

(c) require the provision of funding for the advice service from prescribed sources.

(5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(John Milne.)

This new clause makes provision by regulations for everyone to receive free, impartial pension advice at age 40 and again around five years before their expected retirement.

Brought up, and read the First time.

[John Milne]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

New clause 40—Targeted Advice Access for Under-Saving Cohorts—

“(1) The Secretary of State must make regulations to provide enhanced access to pension advice or guidance for cohorts identified as under-saving for retirement.

(2) Regulations may make provision for—

(a) identifying under-saving groups, including but not limited to—

(i) women,

(ii) ethnic minority groups, and

(iii) others affected by long-term pay or pension gaps;

(b) mechanisms to fund and deliver targeted support;

(c) reporting and evaluation requirements to assess take-up and effectiveness.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

This new clause allows for the creation of targeted pension advice or guidance interventions for groups at risk of under-saving for retirement.

New clause 41—Cap on cost of advice for pension holders—

“(1) The Secretary of State may by regulations introduce a cap on the cost recoverable for providing pension advice per pension holder under any scheme operating free or subsidised advice.

(2) The cap may vary depending on—

(a) the value of the pension pot;

(b) the type of pension scheme;

(c) the complexity of advice required.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

This new clause enables the introduction of a cost ceiling for advice provision to members of pension schemes.

New clause 43—Auto-Enrolment into Pension Wise Guidance Sessions—

“(1) The Secretary of State must make regulations requiring that individuals reaching prescribed ages are auto-enrolled into Pension Wise guidance appointments.

(2) The regulations may provide for—

(a) opt-out procedures;

(b) the prescribed ages or pension milestones at which auto-enrolment occurs;

(c) the means by which schemes notify members and facilitate appointments.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

This new clause aims to increase engagement with Pension Wise by auto-enrolling members into guidance sessions at key decision points, with the ability to opt out.

[John Milne]

We have tabled a number of amendments designed to improve people’s access to advice. As I said in a previous sitting, for me, the biggest missing link in this Bill is the absence of action on pensions advice. Relatively few people are able—or perhaps willing— to access paid advice, and that situation is not likely to change. We have to find another way.

The purpose of new clause 1 is to help people to properly understand their pension options through universal access to free, impartial advice at key life stages. We previously debated how that might be funded—slightly ahead of time—but this is purely about the principle of that advice.

Most people find pensions very complicated. It is hard to persuade people to engage with the issue at a young enough age, and it is even harder for someone to grasp what would constitute an adequate pension many years before they might have to draw on it. The Work and Pensions Committee, of which I am a member, has repeatedly highlighted this issue and examined ways to improve things.

The intention of new clause 1 is to ensure that everyone—not just the financially literate or well advised—can make informed decisions about retirement. Advice would be offered at or around age 40, which is a critical moment for mid-life planning and pension consolidation, and again within six years of expected retirement, to support decisions about drawdowns, annuities and retirement income options. That change is designed to give people confidence and clarity about their pensions, and to avoid poor decisions that would undermine retirement security.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

I have read the new clause with interest, and listened carefully, and I am sure that this Committee is united in wanting there to be good advice on pensions. It would help me to better understand the proposal if the hon. Member could describe why he thinks the Money and Pensions Service is not already providing that, and why he thinks there is a gap that would justify this type of measure.

[John Milne]

I thank the hon. Member for her question. We have to look at performance: over the years, most people—the great majority of people—have not been getting any advice. Those who do tend to be better off because they have more private pensions, so they are obviously far more engaged, but the majority of people, especially now we have many on auto-enrolment, have minimal engagement. There are some very good services on hand—such as Pension Wise advice, which is free; I will come on to that in another measure—but, overall, people are simply not accessing that advice.

We are keeping the wording of the new clause reasonably open to establish the principle. There are many ways to solve the problem, and we will come to some of those in other new clauses. We are hoping to get agreement on the principle, though there are many ways to crack this particular egg.

Moving on to new clause 40, this is about targeted advice access for under-saving cohorts. Its purpose is to put the focus on groups of people who have historically been among the worst served by our current pension system.

[John Grady (Glasgow East) (Lab)]

Has the hon. Gentleman considered some of the reforms that the FCA is considering, such as the advice guidance boundary review? I understand the thrust of what he is trying to do—to ensure that people get proper pension advice. Hopefully, everyone would agree with that, but I wonder how it fits in with the wider context of the work that the FCA is doing.

[John Milne]

This is really about trying to place the Minister’s attention on this important issue—we will not press the new clause to a vote. It is about focusing the Minister’s mind on the task at hand. The undersaving groups include, but are not limited to, women, ethnic minority groups and others affected by long-term pay or pension gaps. The new clause would provide mechanisms to fund and deliver targeted support.

New clause 41 is designed to put a cap or ceiling on the amount of free advice accessed by any individual saver. It is a subset of new clause 1. Some individuals have very complicated financial affairs, which threaten to take a disproportionate amount of effort to decipher, in the event that we were to provide free advice. Those individuals will tend to be much better off and with multiple pension pots, which is precisely why they will end up needing more advice. Placing a ceiling on the advice available would ensure that the free advice was targeted only at those who needed it most.

New clause 43 is a potential solution to the information deficit that we are trying to address. It would enable auto-enrolment into Pension Wise as the vehicle for giving advice. We tabled it as a probing amendment to provoke the Minister’s consideration. The purpose of the new clause is to help people properly understand and engage with their pension by auto-enrolment into Pension Wise advice at key stages, with the freedom to opt out. Pension Wise guidance is free, impartial and has very high satisfaction rates—94%—among those who have used it, yet uptake remains strangely low, which is an excellent illustration of exactly why the whole advice area needs urgent attention.

Government data shows that of those who have accessed defined-contribution pension pots, only 14% have done so after receiving Pension Wise advice. That is despite various efforts, including a stronger nudge to encourage taking guidance before pots are accessed. Wake-up packs and other communications have shown limited effectiveness, and the evidence shows that savers will need more than passive information; they need action-oriented support.

If anything, the situation is getting worse. The proportion of pensions accessed after receiving guidance or advice has reduced by around 9 percentage points since 2021-22. Evidence from the DWP’s 2022 research shows that although most people start saving for retirement in their 20s and 30s, many do not start planning for retirement until their 50s. Auto-enrolment into guidance would therefore significantly increase take-up and improve retirement outcomes for many. Defined-contribution scheme members, in particular, often lack clear information about their options; Pension Wise would help fill that gap.

New clause 43 leaves flexibility for the Secretary of State to determine the appropriate ages, processes and notification methods. We recognise that it would be a significant move, and that there would be technical issues to solve. That is why we have tabled it only as a probing new clause, to explore whether the Government will look at trials or further measures to boost guidance uptake. Auto-enrolment into a pension scheme has been a great success, so perhaps the next logical step is auto-enrolment into advice. Why not try it?

[Mark Garnier]

I am keen to speak to these Liberal Democrat new clauses, because we have a fundamental problem. Research by Pensions UK shows that more than 50% of savers will fail to reach their retirement income targets set by the 2005 Pensions Commission, and closing the gap between what people are saving and what they will need must be a pressing concern of any Government. So, we need the second part of the pensions review to be fast-tracked, with a laser-like focus on pensions adequacy.

This takes me back to when I first became a Member of Parliament some 14 or 15 years ago. The big issue at the time in the independent financial advisers market was the retail distribution review. My hon. Friend the Member for West Worcestershire (Dame Harriett Baldwin) and I held our first Backbench Business debate on the retail distribution review, and it is recorded in Hansard that we predicted this would be a problem as a result—fewer independent financial advisers being available to give advice.

There were three key elements of the retail distribution review. They were very well-intended, and let us not beat about the bush: there were reasons why they were brought about. One of them was intended to raise the professional standards of independent financial advisers, and I think we would all agree that that has to be a good thing. The advisers complained at the time because they did not want to take exams. If they had been in the business for 40 years, why would they feel that they needed to take an exam? But why should they not improve their standards? There were issues to do with lifetime liability—advisers’ taking responsibility beyond seven years for advice that they had given, which was very contentious. Also there was clarity on the models of advice being given.

However, the key element that caused the problems was where independent financial advisers, prior to that moment, were being paid a commission on the product that was being sold, which potentially led to product bias. If a commission was being paid at 2.5% on one product and 1% on another, the independent financial adviser would have a material interest in selling that higher-commission product, even if it was a worse product. That could have been dealt with by having a maximum commission rate on all the products; it could have been set at 100 or 150 basis points, which would have dealt with that problem. We saw this issue in the London stock exchange until 1986, when there were fixed rates of commission, so nobody could undercut another broker by providing cheaper dealing measures. We therefore knew it could work.

The direct result of all this was that when the retail distribution review was brought in by the FCA in January 2013, we saw a massive drop in the 35,000 independent financial advisers. That has since recovered, and we now have around 36,000 advisers. The important point is that a financial adviser who goes out to persuade somebody to take advice on their pension now needs to charge a fee. Before that, to the person receiving the advice, the financial adviser would appear to be doing it for nothing. There would be an agreement, so it would be transparent and they would know exactly what was going on.

However, the point is that now, if I am being asked to put money into a pension fund and I know I am paying the 1.5%, the fact that the commission is coming out of the money going in feels much less restrictive than being sent a bill for £1,500 or £2,000. That is much more difficult to meet, even though it comes to the same point in the end. The result of this is that, whereas about 50% of people used to put money into pensions and receive financial advice, the number is now 9%.

There are an awful lot of newly elected Members of Parliament here. After 10 or 15 years, they will find themselves in a Bill Committee making these points and saying, “We told you this would be a problem. We told you so, yet here we are trying to resolve a problem that we knew was going to happen, and we allowed it to.” I am very cynical about Parliament sometimes, as all Members will be eventually. The important point is that the Liberal Democrat new clauses are an attempt to deal with the problems that we knew would come about. Auto-enrolment is brilliant—we really like auto-enrolment—but there are various things coming in under this Bill. We have to be careful that the things we bring in with the best intentions do not end up creating bigger problems due to unforeseen circumstances.

If the Liberal Democrats pressed new clause 1, we would happily support it, as it is a good amendment. It will be interesting to see if that comes through, but this is something we have to get right. People need to get advice because far too many people are going to go barrelling into their 67th birthday, or whatever it is, and suddenly discover that they have run out of money, and that is not a good place to be.